There's a reason they call these minerals "rare" -- they are! But they're also necessary. Neodymium is a vital component of EV motor magnets. According to Reuters, two other minerals -- terbium and dysprosium â€"are added to neodymium to allow it to remain magnetic at high temperatures.

Among the people sounding the alarm about the scarcity of rare earth metals is Mike Crane, who runs the growing EV and hybrid business at the fourth-largest global parts supplier ($20 billion in sales for 2009), Continental Corporation. Of course, Continental has a dog in this hunt. As an alternative to the permanent-magnet motors in most electric cars, it is deploying a brushed synchronous motor that uses no rare earth metals. The motor will be used in a European EV coming to the market next year.

"Rare earth availability is a serious problem as the EV market grows, though I'm not seeing much consternation about it yet," said Crane in an interview. "We could be trading dependence on one commodity, foreign oil, for another, rare earth metals."

The Chinese appear to be tightening their control over rare earth production. Crane points out that mining rights for the 17 rare earth metals would be restricted to state-controlled mining companies under a draft proposal submitted to China's cabinet. China also capped production levels for 2010, and imposed a moratorium on new mining licenses until next summer.

"There are other reserves around the world, but they're not as rich as China's," Crane said. "And then there's the question of whether it will be economic to mine the reserves in places like California, given much lower labor costs in China." The U.S. was a major player in rare earth metals,Popular Science reports, but between 2005 and 2008, 91 percent of its supply came from China.

An estimated 180,000 Toyota Priuses will be sold in the U.S. this year, and every single one of them uses in its electric motor some 2.2 pounds of neodymium, a rare earth mineral that is mostly found in China. Hybrid and electric cars (as well as wind turbines) use various rare earths in abundance, which is a growing problem as China starts to electrify its vehicle fleet and will need those metals for its own production.

The U.S. has some rare earth reserves, and a rare earth mine is expected to open in California in 2012, but some 95 percent of the supply is believed to be in China. One bright spot in this picture is the new major metals find in Afghanistan, which the Pentagon says could be "the Saudi Arabia of lithium."

Rare earth supplies are crucial, because more than 30 companies have hybrid electric, plug-in hybrid and battery EV programs underway, and 18 million vehicles will use nickel-metal-hydride and lithium batteries by 2025.

The search appears to be on for sources of rare earth metals. Japanese firms are, according to Reuters, "showing strong interest" in a Canadian rare earth site at Thor Lake in the Northwest Territories. Toyota is among them (it's also exploring Vietnam), because according to strategic metals expert Jack Lifton its Prius is "the biggest user of rare earth metals of any object in the world."

The Department of Energy is debating creation of what could be called the National Research Center on Rare Earths and Energy. It looks like we're going to need it.